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Bond Report: U.S. Treasury yields rise as jobs report brings forward Fed taper expectations

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U.S. Treasury yields rose Friday after a stronger-than-expected jobs report brought forward expectations for the Federal Reserve to ease away from its accommodative stance.

The bond market will remain open until 12 p.m. ET in observance of the Good Friday holiday, even as European exchanges and most other U.S. markets are shuttered.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
1.719%

rose 4.8 basis points to 1.729%, while the 2-year note rate
TMUBMUSD02Y,
0.180%

added 2.4 basis points to 0.184%. The 30-year bond yield
TMUBMUSD30Y,
2.369%

climbed 3.4 basis points to 2.374%. Bond prices move inversely to yields.

What’s driving Treasurys?

All eyes fell on the U.S. Labor Department’s March jobs report as investors digested additional signs that the U.S economy is building momentum.

The U.S. economy added 916,000 new jobs, above the average forecast of MarketWatch-polled analysts of 675,000. As expected, the unemployment rate fell to 6%, from 6.2% in February.

Though the jobs report delivered on the market’s high expectations, the U.S. economy will still remain several million jobs away from pre-pandemic levels.

Long-term government bond yields rose as the faster pace of job gains led investors to bring forward the timing of the Fed’s eventual pullback from its accommodative policies.

Read: Why the jobs report will be important, even if no one is around to trade it

Analysts have warned liquidity is likely to be thin due to the Good Friday holiday. That could exacerbate any wild swings in the bond market, following the jobs report.

What did market participants say?

“The Treasury market reaction seems it’s pressing the Fed,” said Eric Merlis, head of global markets trading at Citizens Bank, noting the 5-year note saw the biggest selloff among U.S. government bonds on Friday.

“Certainly, if you look at the graph of infections, we’re absolutely moving in the right directions and moving to a stronger economy,” said Merlis.

“It wasn’t just the March jobs number that impressed, as January and February saw big revisions higher as well,” said Ryan Detrick, Chief Market Strategist for LPL Financial in a note Friday. “This is about as clear as it gets, the reopening is happening faster than nearly anyone expected.”

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